Troubled insurer American International Group Inc., now 80% owned by US taxpayers, spent the weekend deflecting mounting criticism of how government funds have been funneled to various banks and used to pay employee bonuses at the business unit that almost sank the company.

After calls for more transparency, AIG disclosed Sunday that roughly two-thirds of the $173.3bn (€133.3bn) in federal aid it received has been paid out to trading partners such as banks and municipalities in the US and abroad.

The disclosures came as AIG was lambasted for about $450m in bonus payments planned for employees at a business unit that lost $40.5bn last year. The unit's woes pushed the company to near-collapse, forcing the government bailout.

The disclosures highlighted the increasingly close but uncomfortable relationship between AIG and the US government, which six months ago was a restless creditor and now has little choice but to be a patient ally.

"Something is terribly wrong with this picture, and the reckless behavior at AIG must stop immediately," said Rep. Elijah Cummings (D., Md.), in a statement Sunday. He called on AIG's government-appointed chief executive, Edward Liddy, to resign over the bonus-payments issue.

An AIG spokeswoman declined to comment on Rep. Cummings's statement, and referred instead to a letter from Mr. Liddy in which he noted that he was asked by Treasury Secretary Timothy Geithner's predecessor to take the top job at AIG in September. He also said that he's not getting any bonus or retention payments. "My only stake is my reputation," he wrote.

The list of AIG's trading partners reads like a who's who of global finance. It includes big US banks such as Goldman Sachs Group Inc., which received nearly $13bn. Large European firms, such as Société Générale SA and Deutsche Bank also appear, each having received nearly $12bn.

Much, but not all, of the money was linked to contracts AIG sold the firms to insure against losses on securities—notably those related to US mortgages. As AIG's condition deteriorated, the trading partners were given more collateral to protect against losses. Some were made whole late last year when the securities were bought by a company funded largely by the Federal Reserve.

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Many of the same financial institutions were customers of AIG's securities lending business, and were returned billions of dollars in cash that they earlier lent AIG.

A Goldman Sachs spokesman said its own exposure to AIG has always been fully backed by collateral or hedged by the bank. A Deutsche Bank spokeswoman declined to comment.

Such details have been largely hidden from view since the bailout was first struck in mid-September 2008. Both AIG and the Federal Reserve said disclosures could imperil trading positions and business relationships. But elected officials in Washington have been pressing for more disclosure on where taxpayer dollars have been flowing.

In all, the disclosure shows that between Sept. 16 and Dec 31 last year, about $120bn in aid to AIG has been distributed in the form of cash, collateral and other payouts to banks, municipalities and other institutions in the US and abroad.

The sum includes $52bn of outflow from AIG's Financial Products unit, the unit that made bad insurance bets on mortgage assets. Another $43.7 billion was used to repay banks and brokers that were customers of AIG's securities-lending business. It also includes $24bn in Fed money that was used to buy mortgage-linked securities that AIG insured so that the contracts tied to them could be torn up.

There are political risks to the disclosures, notably the fact that taxpayer dollars are essentially passing through AIG to make whole private businesses and foreign banks. Yet it was concern over the risk of a cascading series of bank failures, both in the U.S. and abroad, that spurred the government to consent to an emergency rescue plan.

Fears of financial stress at US municipalities was another worry.

Sunday's disclosures show that AIG paid out $12.1bn to municipalities in many states from Sept. 16 to Dec. 31, under guaranteed investment agreements that promised a fixed rate of return.

AIG didn't identify the municipalities, but listed the states where municipalities received the most, including California and Virginia, each with slightly over $1bn. Hawaii was third, with $770m.

AIG has been shelling out large sums elsewhere.

On Sunday, new criticism emerged about $450m in bonuses paid to employees of AIG's Financial Products unit, which made a series of bets on credit default swap contracts that drove $40.5bn in losses last year.

Lawrence Summers, the top White House economic adviser, termed the AIG bonuses "outrageous." While there are many troubling aspects of the financial crisis, "what's happened at AIG is the most outrageous," he said.

At the same time, Mr. Summers said that "we are a country of law," and added that the government can't simply abrogate the contracts. Mr. Summers spoke on ABC's "This Week."

A top Democratic lawmaker suggested that earlier, stricter limits should have been placed on AIG. "Clearly there was a mistake at the beginning," said Rep. Barney Frank (D., Mass.), the chairman of the House Financial Services Committee.

Republican Sen. Bob Corker of Tennessee said it was important to determine whether the payments are legitimate commissions for financial products that brokers have sold, as opposed to executive bonuses. But he added that financial institutions that take government money "have to play by a different set of rules." Mr. Corker spoke on "Fox News Sunday."

In his letter to Mr. Geithner, dated Saturday, AIG's Mr. Liddy said the firm's "hands are tied" on making $165m of the payments that were due Sunday.

The payments at AIG's financial-products unit are in addition to $121.5 million in incentive bonuses for 2008 that AIG will start making this month to about 6,400 of its roughly 116,000 employees. Separately, AIG is also making $619m in retention payments to 4,200 employees.

Together, the three programs could result in roughly $1.2bn in retention and bonus payments to AIG employees. At least some individual employees are receiving millions of dollars—at the financial-products unit, for instance, seven employees will get more than $3m for 2008, according to an AIG document.

Since the bailout, AIG has installed a leader of the financial-products unit, which it is now trying to wind down. But in early 2008—before Mr. Liddy joined the firm—AIG set up a retention program for the unit's employees, according to Mr. Liddy's letter.

In the letter, Mr. Liddy said "outside counsel" had advised that the previously agreed-to payments to employees at the financial-products unit are "legal, binding obligations of AIG."

"I do not like these arrangements and find it distasteful and difficult to recommend to you that we must proceed with them," Mr. Liddy wrote. "Honoring contractual commitments is at the heart of what we do in the insurance business."

In a letter to Mr. Liddy on Friday, New York Fed President William Dudley said Fed officials are "deeply troubled" by the nearly $170 million in payments to about 370 financial-products employees. "We have urged you to pursue all alternatives," Mr. Dudley wrote, recounting discussions with the company. "In addition, we expect that you will continue to review all of AIG's major compensation programs."

If it wanted to try to avoid making the payments, AIG could tell employees that if they chose not to take the bonus, they could keep their jobs, suggested Mark Reilly, a partner at 3C-Compensation Consulting Consortium, a Chicago firm. "There's a lot of people looking for work on Wall Street," Mr. Reilly said.

—Write to Liam Pleven at liam.pleven@wsj.com, Serena Ng at serena.ng@wsj.com and Sudeep Reddy at sudeep.reddy@wsj.com; John D. McKinnon and Sara Schaefer Muñoz contributed to this article.